Dealer Groups

Morgan Auto Group appoints north Florida regional director

TAMPA, Fla. - 

Morgan Auto Group announced Monday that it has named Dan Like the regional director of its north Florida operations in Jacksonville and Gainesville.

Like most recently served as general manager for six years at Morgan Auto Group’s Honda of Gainesville store.

“I am so pleased that Dan Like will have this opportunity to grow his influence within our group. Dan is a fantastic business person but also an ethical leader who never forgets about the human element of our business,” Morgan Auto Group chief executive officer Brett Morgan said in a news release. “He is disciplined and detail oriented and will be a tremendous asset to our entire leadership team.”

During his tenure at the Honda of Gainesville store, in addition to reaching Honda sales goals, the capacity of the store’s service and repair business grew significantly, according to Morgan Auto Group.

The store received the American Honda President’s Award in 2016.

“I am looking forward to working with the rest of our team to make a greater impact in the Gainesville market where I currently live and in my hometown of Jacksonville as well,” added Like.

Morgan Auto Group’s portfolio includes 29 dealerships representing 15 brands. In the two regions Like is leading, there are seven dealerships representing the Kia, Buick, GMC, Mitsubishi, Honda, Volkswagen and Mercedes-Benz brands.

Correction: Edited to include correct dealer count number for Morgan Auto Group. 

LHM Nissan store purchase expands Colorado footprint to 14 locations

DENVER - 

Larry H. Miller Dealerships recently acquired a Nissan store in Centennial, Colo., growing its footprint in the Denver Metro area to 12 stores.

The store has been renamed Larry H. Miller Nissan Arapahoe and is located at 10030 East Arapahoe Road.

“Nissan has been a standout brand for us, and this location on Arapahoe Road is very conducive to selling cars,” LHM president Dean Fitzpatrick said in a news release. “We look forward to continuing to operate with integrity and provide an outstanding level of service to our customers as we grow in the Denver market.”

LHM now operates a total of 14 dealerships in Colorado and employs over 1,200 people across the state, according to the group.

Larry H. Miller Nissan 104th opened just last year. Larry H. Miller Dodge Ram Havana, Larry H. Miller Colorado Chrysler Jeep, Larry H. Miller Fiat Denver and Larry H. Miller Nissan Southwest opened in 2016.

Additionally, LHM’s first Nissan store, Larry H. Miller Nissan Highlands Ranch, opened in 2006.

The group’s portfolio includes 64 dealership locations in seven western states.

Penske purchase 'almost doubles' standalone used-car business in UK

BLOOMFIELD HILLS, Mich.  - 

Penske Automotive Group is buying another used-car retailer in the U.K., a move the group’s chairman says “almost doubles” its standalone pre-owned store business in the country.  

The dealer group said Tuesday it has signed a deal to purchase The Car People, a used-car retailer with four large-scale locations that sell a combined total of approximately 18,000 units per year.

The Car People launched in 2000 and has stores in Wakefield, Sheffield, Manchester and Warrington, Penske said.

“I am excited to be joining forces with the team at The Car People, a great business that operates under a similar model to our own,” Penske Automotive Group chairman Roger Penske said in a news release.

“The acquisition of The Car People strengthens the company’s market position in our second largest market, almost doubles the size of our U.K.-based Used Car Supermarket business, and continues to further our diversification strategy within the transportation services industry,” he said.

The purchase, which is subject to certain conditions, will likely close in the first quarter. The dealer group estimates The Car People will bring in about $300 million in annualized revenue, and estimates annualized accretion from the deal at $0.05 to $0.07 per share. 

This follows a similar move Penske made in early January, when it announced an agreement to buy CarShop, a U.K. chain of five standalone used-car retail stores. That acquisition was completed in February.

“The acquisition of The Car People enables us to accelerate the expansion of our Used Car Supermarket Division and reinforces our commitment to significantly grow our used-car business,” said Darren Edwards, chief executive of Penske’s U.K. operations.

“Combined with the acquisition of CarShop earlier this year, this new acquisition will provide for potential significant operational synergies within this part of our business,” he said.

Stateside, Penske announced a deal last December to buy U.S.-based used-car retailer CarSense, closing that acquisition in January.

Both moves from earlier this year appear to be bearing fruit for the company.

In the third quarter, Penske Automotive’s CarSense and CarShop standalone used-car business lines retailed a combined 11,626 units, according to company earnings.

Year-to-date, which includes results since acquisition, the standalone platforms had retailed 30,952 used units through three quarters.  

Quarterly revenue from the standalone stores in Q3 approached $200 million, while year-to-date revenue was at $535.7 million.

Gross profit per unit retail was at $1,152 in the quarter, with the year-to-date figure at $1,222.  

F&I gross profit per unit on these sales were $1,188 in Q3 and $1,182 year-to-date through Q3, putting the total variable gross profit per unit at $2,340 and $2,404, respectively.

During the Q&A portion of Penske’s quarterly earnings call in October, Roger Penske was asked if his viewpoint on CarShop and CarSense had changed since the dealer group purchased the respective used-car standalone retailers.

 “Yeah, it’s changed. I like it more,” Penske said with a laugh.

“I think we’re very fortunate to get into this business,” he said. “The technology, the people. We’ve had no turnover with senior management. Both of these businesses, I think they applaud the fact we’ve come in with capital, with ideas, with an expansion mode offense.”

Public dealer groups paying a premium to expand footprints

FORT LAUDERDALE, Fla. - 

If publicly traded dealer groups wanted to buy another rooftop, they had to open their checkbooks or dig deeper into their credit availability based on the figures shared in the Q3 2017 edition of the Haig Report released on Wednesday by Haig Partners.

For the year-to-date numbers ending Sept. 30, Haig Partners calculated publicly traded retailers had spent $935 million on dealerships in the U.S., an increase of 62 percent from the $578 million deployed during the same period in 2016.

The report pointed out that Lithia Motors was the most active of the publicly traded companies and continues to target underperforming large platforms in different parts of the U.S.

“Despite all the noise regarding the potential negative impact on auto dealerships from ride sharing, electrification, autonomous vehicles and changes to the franchise system, the "smart money" is still buying dealerships,” Haig Partners said.

The report also shared that the number of dealerships that sold in the U.S. through the first nine months of the year declined by 18 percent compared to the same period in 2016.

Haig Partners also computed profits at privately owned dealerships for the 12 months ending Sept. 30 were 3.8 percent lower than year end 2016 due to rising costs.

Values of privately owned dealerships fell 3.2 percent during this period, according to the Haig Report. Haig Partners' franchised blue sky multiples were mostly unchanged in Q3, with increased valuations for Subaru and Volkswagen only.

Continuing the trend from 2016, the report showed demand for dealerships shifted from luxury brands to domestic brands that are heavier in trucks and SUVs. Luxury dealerships accounted for 14 percent of acquisitions through Q3, down from 17 percent through Q3 of last year, and purchases of domestic stores increased to 50 percent through Q3 from 46 percent through Q3 2016.

Other key findings from the Q3 2017 Haig Report include:

—Macroeconomic indicators such as GDP, interest rates, employment, number of miles driven and consumer sentiment remain highly favorable for dealers.

—Other trends such as used-vehicle pricing, incentive spending by the OEMs, and rising inventories are growing less favorable to dealers.

—Fleet sales have fallen by 8.3 percent through October, although retail sales are almost flat from the same period in 2016.

—Declines in new and used gross profits per vehicle are being offset by gains in F&I and fixed operations.

—Sales and gross profits continue to increase at dealerships, but expenses are rising faster leading to earnings declines at many public and private dealers.

—The average dealership pre-tax profit during the last 12 months was $1.41 million

—Average estimated blue sky value per dealership dipped 3.2 percent from the end of 2016 to $6.8 million.

—Potential threats from autonomous cars, ride sharing, electrification and changes to franchise laws are so far having minimal to no impact on dealership values.

—Public auto retailers are spending more of their capital on acquiring auto dealerships in the U.S. than last year.

—Private equity firms and family offices continue to make substantial investments in auto retail.

“As we expected, the sharp drop in the first quarter of the year has been offset by strong second and third quarters and we are expecting robust conditions for the rest of the year,” Haig Partners president Alan Haig said. “There are many buyers and sellers in the market and deal financing remains readily available. These are good conditions for buy-sells, so long as sellers understand that their leverage is more limited than in the past.

“Buyers have many options and are increasingly concerned about future profits. They are less likely to chase deals or pay big premiums. If dealers want to sell their dealerships they will likely need to accept today’s offer since tomorrow’s offer could be lower,” Haig continued.

Haig Partners is seeing these conditions in its current engagements that include domestic, import and luxury dealerships that range from Florida to New York to California. The firm has closed dealership transactions with a value of more than $3.6 billion during the past 20 years.

The Haig Report is published each quarter and includes comprehensive data, analyses and opinions about the auto retail industry. Also included in each edition are Haig Partners' blue sky multiples that can serve as a gauge for franchise values.

To download the report, go to this website.

Black Friday is no turkey when it comes to car shopping

CARY, N.C. - 

While many Americans might be napping off that extra helping of turkey, car-shopping activity isn’t likely to hit the snooze button on Black Friday.

New research from Cars.com indicates that 18 percent of car shoppers say they have more reason to visit dealerships that day. And nearly three-fourths of that crowd (74 percent) say it’s directly due to the special deals and incentives being offered on Black Friday.

Interestingly enough, though, it’s not just the sweet deals that are driving some consumers into the showroom.

“With deals aplenty, shoppers have good reason to go car shopping,” said Cars.com editor-in-chief Jennifer Newman, in a news release. “However, our research indicated that regardless of deals and incentives, 16 percent of shoppers are more inclined to visit a dealership this Black Friday because they have more available free time, and 8 percent said they’d shop over Black Friday simply because ‘it’s fun.’”

And Black Friday may be even more prosperous for dealers than the following Cyber Monday or any other portion of the weekend, according to data from Dealer.com.

The company’s Dealer DataView index shows that after dipping modestly at the end of summer, total dealership website traffic climbed 3 percent from September to October.

Views of vehicle detail pages climbed 2 percent, the index found.

These two measures combined indicate that fall is showing a “relatively robust selling climate,” Dealer.com said in a news release, noting that dealers are preparing to see activity spikes for both Black Friday and Cyber Monday.

“However, insights from last year regarding credit application volume — a leading indicator of purchase intent — suggest that dealers have a compelling reason to prioritize Black Friday over the rest of the holiday weekend,” the company said.

Last year, credit applications on Black Friday were up nearly 40 percent against other Fridays that November, according to data from Cox Automotive sister company Dealertrack that was cited by Dealer.com.

But Cyber Monday did not see a similar lift, as there was just a 2.6-percent rise against other Mondays that month.

“The DataView index provides a timely snapshot and actionable insights for dealers seeking to better understand consumer sentiment,” said James Grace, senior director of analytics products at Cox Automotive Media Solutions, in a news release. “As dealers gear up for the holiday season, the November report points to another period of robust demand and purchase intent from car shoppers.”

Auto industry social media response rate high, but response time slow

CARY, N.C. - 

While automotive comes in as the industry least likely to be complained about in a top 10 list of industries most complained about on social media, the industry still has room to improve its response time, shows recent consumer data from Sprout Social.

“People don’t buy cars everyday — so while maintenance issues and product questions can pop up anytime, they may not have as much reason to negatively call out auto brands as they would for the CPG brand that, for example, makes the cereal they eat for breakfast every morning,” Sprout Social director of content Lizz Kannenberg said in an email interview.

“The potential payoff for complaining about your car is different than it is when you complain about your cereal; whereas you might get a coupon for a free box if you complain about your o’s or flakes, you’re unlikely to get a comparable ‘make good’ from an automaker.”

At 12 percent, the automotive industry average response rate on social is higher than the all-industry average at 11 percent. But among the list of 10 industries examined in the Q3 2017 Sprout Social Index, automotive also came in as the No. 6 industry needing the most help with social customer service.

“While the volume of consumer complaints may not be as high, people aren’t getting the responses they’re looking for when they do reach out,” Kannenberg said.

The auto industry’s average response time to consumers on social is 13.5 hours, the second longest average response rate out of 15 industries, according to the study.

“Responsiveness on social is crucial to how consumers view a particular brand. Think through how people are welcomed when they walk into your showroom, dealership or garage. You wouldn’t ignore them point-blank. Extend the same type of welcome to people who reach out to you on social to build the brand, and the customer relationships, that will pay dividends in terms of long-term loyalty,” Kannenberg explained.

Via Survata, an independent research firm in San Francisco, Sprout Social surveyed more than 1,000 consumers online between July 10 and July 14 for the study.

Spokane LHM dealerships to fund Thanksgiving dinner for less fortunate

SPOKANE, Wash. - 

Larry H. Miller Dealerships announced Monday that, for the fourth consecutive year, its Larry H. Miller Lexus, Larry H. Miller Downtown Toyota, Larry H. Miller Honda and Larry H. Miller Hyundai dealerships will fund the Union Gospel Mission’s annual City-Wide Thanksgiving Dinner for more than 1,000 homeless and low-income individuals and families.

In addition to a $5,000 donation, LHM said it will donate turkeys for every car sold or leased at the participating dealerships from this coming Thursday to Nov. 22.

Last year, LHM gave more than 150 turkeys to the Union Gospel Mission, according to the group.

This year’s dinner will be held at the Spokane Convention Center on Nov. 22 from 3:30 p.m. to 6:30 p.m.

“Our employees really look forward to supporting the City-Wide Thanksgiving Dinner each year,” Larry H. Miller Lexus Spokane general manager Bob McLean said in a news release.

“When they’re out shopping for their own Thanksgiving gathering, many of them will purchase an extra turkey to donate to the UGM dinner. In addition, we all enjoy volunteering together as a group to serve the dinner to our neighbors. It’s quite meaningful to see exactly how our donations help and who they help,” he continued.

“On a holiday that’s all about gratitude, we’re very thankful to Larry H. Miller Dealerships for underwriting the City-Wide Thanksgiving Dinner for the fourth year in a row,” Union Gospel Mission executive director Phil Altmeyer said. “They share our heart for this event, which is about showing people who feel down-and-out that they are valuable. Serving a special meal tells people that in a way words can’t express.”

The Union Gospel Mission has worked with underprivileged residents of Spokane since 1951.

In its more than 65 years, the organization has grown from a soup kitchen into a ministry made up of four shelters, two thrift stores, an automotive business and a summer camp for youth.

“It’s important to us to give back and support those who are less fortunate in our downtown neighborhood. We hope that partnering with the Union Gospel Mission in providing a warm meal and a special place to gather brings joy during the holiday season,” added Scott Brewer, general manager at Larry H. Miller Downtown Toyota Spokane.

Members of the public who would like to contribute to the dinner can donate online at uniongospelmission.org/give or at any of the four participating dealerships.

CDK announces support for PCG's auto industry Google Analytics specification

HOFFMAN ESTATES, Ill. - 

CDK Global announced Friday that CDK websites will support the specification for Google Analytics that PCG Companies released for automotive dealers last year.

CDK dealers and dealer groups can now independently review website and marketing performance data from Google Analytics.

“We are excited to offer our dealers a standardized implementation of Google Analytics,” CDK Global product officer of consumer-facing products Max Steckler said in a news release.

“The demand for GA support from customers continues to grow, so it is the right time to meet that need and support this open standard. By leveraging the PCG specifications, our enterprise clients will be able to more easily compare the performance of our latest website technology and marketing solutions in their multi-vendor eco-system.”

The PCG specification provides dealer groups with a standardized set of measurement metrics across website platforms that can help dealers increase Return on Ad Spend from their marketing partners, according to CDK.

“Implementation of the PCG specification will be based on the CDK website data layer – a W3C specification for the uniform presentation of website data, which CDK supports with our responsive website platform,” the company said.

CDK joins a growing list of companies such as CarNow, which have recently publicly endorsed and implemented the PCG specification.

“By supporting a standardized implementation of Google Analytics, CDK demonstrates its willingness to increase data transparency with its clients. The PCG specification will allow dealers to more consistently document website conversions and engagement to improve marketing outcomes,” said Brian Pasch, founder of PCG Companies. “The support of the specification will also allow CDK clients to immediately leverage the independent data insights and traffic quality metrics in VistaDash, our popular Business Intelligence (BI) cloud software.”

This is the second specification published by PCG that has received widespread support from the automotive vendor community, according to CDK.

Details of 6-year journey to AutoNation-Waymo partnership

FORT LAUDERDALE, Fla. - 

Much of AutoNation’s quarterly conference call included nearly every Wall Street observer who participated wanting more details about the dealer group’s partnership with self-driving technology company Waymo—part of Google's parent company Alphabet Inc.

To recap, AutoNation on Thursday announced a multi-year agreement to support Waymo’s autonomous vehicle program. AutoNation said it will offer strategic capabilities to maximize the life of Waymo's vehicles across the United States.

The company highlighted AutoNation franchised stores, AutoNation USA stores and other AutoNation locations, will provide long-term vehicle maintenance and repairs for Waymo’s self-driving Chrysler Pacifica hybrid vehicle fleet and will expand with Waymo as they add additional brands.

Having served more than 40 million customers and representing 33 brands, AutoNation believes it is uniquely positioned to work with Waymo as it expands its operations. AutoNation will offer complex mechanical and cosmetic repairs to maintain Waymo's self-driving fleet.

So how did the companies get to this point? That’s what AutoNation AutoNation chairman, chief executive officer and president Mike Jackson addressed first, sharing that he visited Waymo six years ago when it was GoogleX.

“I was probably one of the first industry people in the door, and had spent a day debating and discussing their approach to autonomous and had one of their earliest vehicles going down the 101,” Jackson said about his visit that included a journey along one of California’s famous highways.

From that point, Jackson said he interacted with Waymo at least once per year.

“I developed a deep admiration for the rigor and discipline of thought and principle,” Jackson said. “They had the whole approach to autonomy where you have to under-promise and over-deliver rather than over-promise and under-deliver when it comes to autonomy and safety.”

Then, Jackson encountered what he called “an epiphany” with regard to autonomous vehicles.

“I confirmed from my own experience and my understanding of customers that this idea that you can have an autonomous system that the driver has to supervise and be prepared to intervene at any moment doesn't really work,” Jackson recollected. “It’s almost against human nature that you have to pay strict attention and be prepared to intervene.

“So they said they don’t need 99.9 percent perfection, they need 100 percent perfection, which means you need redundancy, duplication and sophistication,” Jackson added.

Then entering the picture is Waymo chief executive officer John Krafcik, who already had a strong relationship with Jackson stemming from his days as one of top leaders for Hyundai.

“He and I had a running discussion that, obviously, these are some of the most sophisticated vehicles on the road and to realize the value of the investment in a vehicle, they need to perform at a high level for literally hundreds of thousands of miles,” Jackson said.

“And we both agreed that AutoNation was uniquely positioned to provide those capabilities, both with our scale and our expertise,” Jackson went on to say.

“So you put that together, you now have a strategic partnership to realize this vision of a shared vehicle that is operating autonomously, but at the highest levels of safety, and we think we have significant value,” Jackson added. “And I believe Waymo is the leader in this ambition to have a shared autonomous vehicle operate on a commercial basis with customers in the marketplace.”

In a news release announcing the partnership, Krafcik concurred with Jackson’s account of the relationship development.

“AutoNation has built a reputation for providing excellent service and maintenance that makes cars safer and more reliable,” Krafcik said. “Both companies have a shared vision of enhancing the in-car experience of our customers.

“With its compelling national footprint, modern facilities and trained technicians, AutoNation will help assure that Waymo vehicles are always in top condition as we bring fully self-driving cars to the public,” Krafcik continue.

And with Waymo’s self-driving hybrid vehicle fleet primarily made up of the Chrysler Pacifica at least for now, Fiat Chrysler Automobiles chief executive officer Sergio Marchionne applauded Jackson for making this move.

“As a long standing partner in vehicle sales and service for our brands, FCA commends AutoNation for preparing their operations to support the maintenance and service of autonomous vehicles, including the Chrysler Pacifica Minivans produced and developed for self-driving in collaboration between FCA and Waymo,” Marchionne said.

AutoNation praises One Price strategy for improved Q3 used sales

FORT LAUDERDALE, Fla. - 

AutoNation chairman, chief executive officer and president Mike Jackson didn’t hesitate to point out the reason why the dealer group’s used-vehicle sales during the third quarter jumped 6.4 percent year-over-year.

AutoNation stores retailed 59,330 used vehicles during Q3, up from 55,760 units a year earlier. Jackson told investment analysts why stores moved more used metal when the company hosted its quarterly conference call on Thursday.

“I would say the AutoNation branded One Price experience for pre-owned drives tremendous traffic and interest through our website and through our stores,” Jackson said. “So the One Price sale has to be competitive in the marketplace.”

Announced last October, AutoNation explained One Price allows the company to leverage centralized capabilities, such as centralized pricing and appraisals, and offers consumers a “transparent and stress-free buying experience.”

AutoNation was to fully implement One Price in all existing locations by the end of the second quarter of this year.

While AutoNation turned more used vehicles year-over-year, the company’s gross profit per unit on those vehicles softened by $105 to settle at $1,414. Jackson addressed that metric, too.

“On the margin side, we have to have really strong operational execution. That was not there in the second quarter. We had some issues. I was very forthright about that. We've comprehensively addressed them, and yes, I see more stability in that going forward,” Jackson said.

“So that’s how I see it,” he continued. “The One Price is an experience and a brand attribute that customers like and draws us a lot of business. Sales associates are very enthusiastic about it, particularly millennials that we're now able to attract to work for us, so they don't have to negotiate.

“And then, we on the operating side have to bring in the gross margins. That’s the formula,” Jackson went on to say.

Also in connection with its retail performance, AutoNation watched its new-model sales figure dip 2.4 percent year-over-year in Q3, coming in at 86,192 units after it had been 88,322 units a year ago.

In the F&I office, AutoNation generated an extra $66 per unit in gross profit in that department as the metric rose to $1,660.

All told, AutoNation reported its Q3 net income from continuing operations came in at $98 million, or $1.00 per share. The company estimated that Hurricane Irma negatively impacted Q3 net income by approximately $8 million after taxes, or $0.08 per share.

Also during the third quarter, AutoNation repurchased 9.2 million shares of common stock for an aggregate purchase price of $400 million. As of Oct. 31, AutoNation has approximately $114 million remaining board authorization for share repurchase and 91 million shares outstanding.

Update on parts initiative

Also announced last year, the company offers AutoNation branded parts and accessories at AutoNation USA — standalone pre-owned vehicle sales and service centers.

A year ago when explaining the concept, the company emphasized AutoNation Precision Parts is a high quality, competitively priced line of maintenance and repair parts.

The new product line has been integrated into the company's reconditioning operations, and now enable improved customer retention for retail service, wholesale parts and collision repair business units, including AutoNation USA.

AutoNation Precision Parts was launched in the third quarter of last year in the company's existing stores, with the introduction of AutoNation-branded batteries that feature an industry-leading free lifetime replacement guarantee.

AutoNation Auto Gear, the company’s branded automotive accessory line, offers auto accessories for lifestyle, appearance, protection and vehicle security. AutoNation Auto Gear was also launched in the third quarter in the company's existing stores and is available at each AutoNation USA store.

The company plans to expand both AutoNation Precision Parts and AutoNation Auto Gear product lines in phases as their product portfolios are developed.

With all of those developments in motion, Jackson responded to an inquiry about how much pushback AutoNation has received from automakers.

“Yes, there’s been a discussion of course, and I say to them, ‘Look, if I go back 10 years ago, we had front-end gross on new vehicle sales of 8 percent, 9 percent, cost of 4 percent or 5 percent And today, we have front-end gross of 5 percent and new-vehicle sales is almost a commodity pass-through business and that we have to make all our profits somewhere other than selling the new car.’ Now, I have a franchise, so I've agreed that we will do tremendous volume on new vehicles.

“I understand that. That’s my responsibility,” he continued. “But then I say to the manufacturer, ‘By the way, it’s your stair steps and your margin programs that have brought us to this state, and you’re quite delighted with the fact that front-end gross margins are down to 5 percent. So you have to understand I’ve made this investment in this facility, and I need a way to grow and to do that profitably. And a lot of business that I gave you in the past for relationship reasons, just only for relationship reasons, and partnership reasons, no longer make sense with a front-end gross of 5 percent.’”

So is there a bitter divide between OEMs and AutoNation? Perhaps not.

“And the end of the conversation, I would say is I have earned their respect,” Jackson said. “And they said, ‘If I was in your shoes, I'd be doing the exact same thing and I guess. We don't have to worry about it too much, because who else can do it other than AutoNation?’

“So OK, and I'll take it. That’s fine with me,” he added.